Bulgaria: Parvanov's Veto Of Privatization Law May Be 'Socially Motivated'

March 11, 2002 00:00 GMT

By Julia Guechakov

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Bulgaria: Parvanov's Veto Of Privatization Law May Be 'Socially Motivated'

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Bulgaria's former Socialist-leader-turned-president, Georgi Parvanov, used his veto right for the first time to block the first law passed by the government of the country's former king and now prime minister. Parvanov's decision to send back to parliament the government's new privatization law is unlikely to have any critical economic fallout but it is an act fraught with political meaning.

Prague, 11 March 2002 (RFE/RL) -- Bulgarian President Georgi Parvanov says he vetoed the government's new privatization bill because it lacked social justice.

He listed among the bill's shortcomings the fact that it does not give preferred status to the employees of state enterprises slated for privatization. He also described the 30 September deadline for the conversion of mass privatization vouchers into shares as too short and said the bill did not specify what part of privatization revenues would be set aside for social programs. None of Parvanov's objections was legal in nature and, analysts say, few had to do with economics.

The bill must now return to parliament within 15 days and gain a simple majority for passage.

The government had taken months to prepare the new privatization law which -- though by all accounts far from perfect -- is considered pivotal to its economic program. It had hoped to clinch by midsummer several large privatization deals, including those for BTK Telecom, the DZI state insurer, and the Bulgartabak tobacco company. The revenues from those privatizations are figured into this year's budget.

But in recent months the government of former King Simeon II, who as prime minister goes under the name of Simeon Saxecoburggotski, has seen a steady erosion of public support. Its perceived failure to live up to the high hopes voters pinned on the former monarch ahead of last June's parliamentary election -- coupled with several unpopular economic measures -- have caused its unprecedentedly high approval ratings in the wake of the election to dive in the months that followed.

Parvanov said his veto should not be regarded as an "unfriendly act" toward the government. But his arguments left little doubt that Parvanov, who is seeking an image as a "social" president, seized the first opportunity he had to clearly distance himself from the government's economic policies.

Parvanov's promise to sign the bill into law if parliament overrides his veto is seen as a further tell-tale sign that his decision ultimately was aimed to score political points.

Saxecoburggotski's government reacted angrily to the veto. Hours after it was announced, Deputy Prime Minister Nikolai Vasilev, who is also economics minister, said he did not agree with any of the president's objections.

Vasilev said the new law will allow the government to deal with some of the major problems that have tarnished the process of privatization in Bulgaria for more than a decade -- most notably, corruption among state officials. Getting rid of corruption is one of the main conditions Bulgaria has to fulfill to achieve its goal of joining NATO and the European Union.

Vasilev said, "This law eliminates 90 percent of the opportunities for corruption in Bulgarian privatization, because of which 'privatization' has become a dirty word in Bulgaria in recent years. The [process of] privatization now will be more transparent, quicker, and economically more effective."

Vasilev warned that Parvanov's veto risks delaying large planned privatizations in Bulgaria. He said he hopes parliament will pass the law in its current form as soon as possible.

The opposition Socialists quickly rallied behind the presidential veto, although previously they had backed the law in parliament. The Socialists have criticized some of the government's economic measures but have provided tacit support to the government's overall economic policies. Parvanov's veto suggests that may be about to change.

Krassen Stanchev is head of the Institute for Market Economics, a Bulgarian-based independent economic think-tank. Stanchev told RFE/RL's Bulgarian Service that "The president won the (November) election on a program which, to a certain extent, undermines the consensus on economic policies, as well as with promises of a return -- especially in privatization -- to [Socialist] models of the mid-90s."

Stanchev argues that the reasoning behind some of the president's objections goes back to previous models of Socialist Party governance, which led to a lack of transparency in the privatization process.

As a political side effect, the president's veto could complicate relations between the ruling National Movement Simeon II and its junior coalition partner, the ethnic Turkish Movement for Rights and Freedoms (DPS).

The DPS split ranks with the former king's movement in the presidential election last November, choosing to back Parvanov instead of the DPS's choice for president. More recently, the DPS did some tough bargaining on future privatizations, namely of Bulgartabak, saying it is seeking to safeguard the interests of its traditional supporters, the ethnic Turks in Bulgaria's tobacco-growing regions.

The DPS has said it will back the privatization law in its current form in a new vote in parliament. Still, the president's "socially motivated" veto undoubtedly reinforces its hand and is seen as opening up new opportunities for cooperation with the Socialists. The Institute for Market Economics' Stanchev says, "This (the veto), according to me, creates problems in relations between the National Movement and their coalition partner, the Movement for Rights and Freedoms, and, respectively, creates opportunities for additional parliamentary cooperation between the [DPS] and the Socialist Party."

If it decides to take a new vote on the law in its current form, the Bulgarian parliament is almost certain to override the veto, since the ruling coalition holds a comfortable majority. It may, however, decide to put the law up to debate again, which would lead to an even longer delay. In any case, Parvanov's veto risks delaying planned privatizations by up to a few months at most and is seen as unlikely to cause severe risks to the budget.

It certainly sent the wrong signals to international financial institutions and foreign investors, however, all the more so because the veto was announced while Saxecoburggotski's government happened to be hosting a roundtable with international investors.

Konrad Reuss is director for European countries for Standard and Poor's, which provides independent analysis and information to the world's financial community. Reuss says that, so far, there have been no problems with international lenders. But he points out that the Bulgarian government now needs to demonstrate that it intends to push ahead with planned privatizations.

"Last year, this kind of current account deficit [of 6 to 7 percent of GDP] did not present a financing issue or problem. And for this year, assuming that we will see a similar current account deficit, it will be critical that the government is pushing ahead with its privatization plans to attract foreign investment."

Petar Botusharov, vice president for emerging markets at Deutsche Bank in London, suggests the problem should not be overdramatized because state intervention in privatizations is not unusual in Eastern European countries.

"I think that in other cases in Eastern Europe, we (also) have witnessed the intervention of particular state institutions in the privatization of particular companies. For example, in Poland with their big Telecom, (of) big banks in the Czech Republic and Slovakia, when either the foreign investor is not suitable or conditions for privatization are not right. So, from that point of view, what happened with the privatization law in Bulgaria is not surprising."

Botusharov tells RFE/RL that even a possible future Socialist government would be unlikely to substantially change the course of market reforms in Bulgaria.

"Bulgaria is one of the developing countries in Central and Eastern Europe, and like most countries, Bulgaria has a clear goal of membership in the European Union. It has certain frameworks and agreements with the International Monetary Fund, the World Bank. That is why I think that whether we are talking about Bulgaria or Poland or Romania, there is no substantial difference, in the final count, in the economic policies of the different governments."

The Socialist president's first veto may not have serious economic repercussions. Yet, apparently in accordance with its intention, the ripples the decision has caused in Bulgaria's domestic politics will take some time to subside.

(Georgi Stoychev from RFE/RL's Bulgarian Service contributed to this report.)